Sidhartha Shankar Pramalik, Cuttack V. ITO, Cuttack

ITA 402/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3875 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 11-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Keywords: Unexplained cash credit; Gift; Ignorance of law
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.402/CTK/2015 ASSESSMENT YEAR : 2007 - 08 SIDHARTH SHANKAR PRAMALIK, C/O. KALINGA JEWELLERY, DOLMUNDAI, BUXIBAZAR, CUTTACK - 01 VS. ITO, WARD 2(3), CUTTACK PAN/GIR NO. ABCPP 2704 M (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 11 /04 / 2017 DATE OF PRONOUNCEMENT : 11 /04 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 27.2.2015 , FOR THE ASSESSMENT YEAR 2007 - 08 . 2. THE LAST HEARING OF THE APPEAL WAS FIXED ON 5.4 .2017 ON WHICH DATE, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE REQUESTED FOR ADJOURNMENT OF THE HEARING, WHICH WAS GRANTED IN THE COURT, WHICH WAS NOTED BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. IT WAS ALSO POINTED OUT THAT THIS IS THE LAST OPPORTUNITY TO THE ASSESSEE AND NO FURTHER ADJOURNMENT WILL BE GRANT ED. 2 ITA NO.402/CTK/2015 ASSESSMENT YEAR : 2007 - 08 3. IN SPITE OF THIS, WHEN THE CASE WAS CALLED FOR HEARING, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE AND NEITHER ANY ADJOURNMENT APPLICATION WAS FILED. IT IS OBSERVED FROM THE RECORD THAT THE APPEAL WAS ADJOURNED AT THE REQUEST OF LD AUTHORISED REP R ESENTATIVE OF THE ASSESSEE ON 24.10.2016, 24 .11.2016, 2 1 .1 2.2016, 12.1.2017, 8.3 .2017 , 15.3.2017 & 22.3.2017 . AS SUFFICIENT ADJOURNMENTS WERE GRANTED TO THE ASSESSEE, THE APPEAL WAS HEARD EXPARTE QUA THE ASSESSEE AND DISPOSED OF CONSIDERING THE SUBMISSIO N OF LD DEPARTMENTAL REPRESENTATIVE AND MATERIALS AVAILABLE ON RECORD. 4. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,41,788/ - U/S.40A(3) OF THE ACT. 5. I HAVE HEARD THE LD DEP ARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER FOUND THAT THERE HAVE CASH PURCHASES EXCEEDING RS.20,000/ - ON SEVERAL OCCASIONS TOTALING TO RS.12,08,790/ - IN VIOLATION OF SECTION 40A(3) OF THE ACT . THE ASSESSING OFFICER ADDED 20% OF THE AMOUNT BEING RS.2,41,758/ - TO THE TOTAL INCOME OF THE ASSESSEE U/S.40A(3) OF THE ACT. 6. BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THIS WAS THE FIRST YE AR OF TAX AUDIT WITH A TURNOVER OF MORE THAN RS.40 LAKHS, THE ASSESSEE WAS NOT AWARE OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 3 ITA NO.402/CTK/2015 ASSESSMENT YEAR : 2007 - 08 7. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE CANNOT GET IMMUNITY BECAUSE O F IGNORANCE OF LAW. 8. ON PERUSAL OF THE ORDER OF THE CIT(A), I FIND NO SPECIFIC ERROR IN THE FINDINGS OF THE CIT(A). THEREFORE, I DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN GROUND NO.2, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION RS.10,53,283.13 MADE IN CLOSING STOCK. 10. I FIND THAT THE LD CIT(A) HAS ADJUDICATED AND DECIDED THE ABOVE GROUND OF AP PEAL AS UNDER: THE AO DURING SCRUTINY FOUND THAT THE CLOSING STOCK OF THE ASSESSEE WAS VALUED AT COST OF THE ORNAMENTS OF THE PREVIOUS YEAR. THE AO FURTHER FOUND THAT THOUGH THE ASSESSEE PRODUCED QUANTITATIVE DETAILS OF CLOSING STOCK VA LUATION, QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES AND SALES COULD NOT BE PRODUCED. NO STOCK REGISTER WAS PRODUCED FOR VERIFICATION. IN THE ABSENCE OF THE SAME THE CORRECTNESS OF ASSESSEE'S VALUATION OF CLOSING STOCK WAS NEITHER RELIABLE NOR ACCEPTE D BY THE AO. THE AO ISSUED A SHOW - CAUSE NOTICE REGARDING WHY CLOSING STOCK VALUATION SHOULD NOT BE DETERMINED ON AVERAGE BASIS I.E. OPENING STOCK PLUS PURCHASES (AMOUNT) DIVIDED BY OPENING STOCK PLUS PURCHASES (QUANTITY) MULTIPLIED BY CLOSING STOCK (QUANTI TY). IN THE AVERAGE METHOD OF VALUATION OF CLOSING STOCK THE DIFFERENCE IN CLOSING STOCK CAME TO RS.10,53,283.13 AS DETERMINED BY THE AO. THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE APPELLANT SUBMITTED THAT THE VALUATION OF CLOSING STOCK WAS IN FIFO METHOD AND SHOULD BE DONE AT COST OF PURCHASE FOR THE PREVIOUS YEAR. IT IS EVIDENT THAT THE VALUATION OF CLOSING STOCK AS PER SECTION 145A(A)(T) OF THE ACT THE CLOSING STOCK SHOULD BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER. SOME OTH ER CONCERNS ALSO FOLLOW LIFO METHOD (LAST IN FIRST OUT] AND FIFO METHOD (FIRST IN FIRST OUT}. KEEPING IN MIND THAT THE QUANTITY OF CLOSING STOCK AS SHOWN BY THE APPELLANT, HAS BEEN ACCEPTED BY THE AO, IT IS TO BE VALUED AT A PRICE IN CONFORMITY WITH THE P ROCEDURES AND LAW. IT MAY BE NOTED THAT FOLLOWING A PARTICULAR SYSTEM LIKE FIFO & LIFO DOES NOT ACTUALLY CLARIFY THE CLOSING STOCK 4 ITA NO.402/CTK/2015 ASSESSMENT YEAR : 2007 - 08 POSITION OF THE BUSINESS IN GOLD JEWELLERY. IN THIS CONTEXT THE BELOW MENTIONED DECISIONS OF THE HON'BLE ITAT, CUTTACK BENCH MAY BE DISCUSSED: IN THE CASE OF M/S.BHOGILAL & CO. V. ITO,WARD - 2,BALASORE, ITA NO.407/CTK/20H THE HON'BLE ITAT IN THEIR ORDER DATED 21.10.2011 DELETED THE ADDITION MADE TO THE CLOSING STOCK BY THE AO WHERE THE AO HAD VALUED THE CLOSING STOCK OF GOLD JEWEL LERY AT THE AVERAGE . - CHASE PRICE FOR THE YEAR. THE APPELLANT IN THIS CASE HAD VALUED THE CLOSING STOCK AS OPENING STOCK AMOUNT AS IT IS AND THE BALANCE OF PURCHASE AT AVERAGE PURCHASE PRICE. IN THE CASE OF KHIMJI DAYABHAI JEWELLERS V. ITO,WARD - L,BARIPADA , ITA NO.501/CTK/2012 FOR AY 2008 - 09 THE HON'BLE ITAT IN THEIR ORDER DATED 14.12.2012 EXPRESSED THAT IN THE GOLD ORNAMENT BUSINESS VALUATION OF CLOSING STOCK AS PER LIFO METHOD OR FIFO METHOD WOULD NOT HOLD GOOD. THE HON'BLE ITAT DELETED THE ADDITION TO TH E CLOSING STOCK MADE BY THE AO BY VALUING THE SAME AS PER FIFO METHOD. THE HON'BLE ITAT, CUTTACK ACCEPTED THE WEIGHTED AVERAGE PRICE METHOD OF VALUATION OF CLOSING STOCK AS HAS BEEN DONE BY THE APPELLANT. CONSIDERING THE CASE OF THE APPELLANT AND THE ABOV E TWO JUDGMENTS OF THE HON'BLE ITAT; I AM OF THE OPINION THAT WEIGHTED AVERAGE PRICE METHOD OF VALUATION OF CLOSING STOCK IS MORE APPROPRIATE FOR VALUATION OF GOLD ORNAMENTS AS THE PRICE OF GOLD IS EVER CHANGING. THE AO HAS EXACTLY DONE SO. I THEREFORE SUS TAIN THE ACTION OF THE AO. 11. IN GROUND NO.3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.8,00,000/ - U/S.68 OF THE ACT. 12. I FIND THAT THE CIT(A) HAS ADJUDICATED AND DECIDED THE ISSUE AS UND ER: THE AO DURING SCRUTINY FOUND THAT THE CAPITAL A/C. OF THE ASSESSEE IS CREDITED BY AN AMOUNT OF RS.8,00,000/ - . THE AO THEN REQUESTED THE ASSESSEE TO FURNISH THE DETAILS OF SUCH CAPITAL INTRODUCTION SUCH AS SOURCE AND MODE OF SUCH CREDIT. THE ASSESSEE REPLIE D THAT 'ADDITION OF RS.8,00,000/ - WAS INTRODUCTION OF CAPITAL FROM PERSONAL ACCOUNT TO FIRM ACCOUNT THROUGH LEDGER ENTRY. THE AO FOUND THE EXPLANATION FURNISHED BY THE ASSESSEE NEITHER CLEAR NOR COMPREHENSIVE. IT DID NOT SHED ANY LIGHT ASKED REGARDING THE SOURCE OF SUCH CREDIT AND MODE OF INTRODUCTION. NEITHER THE LEDGER COPY OF THE CAPITAL ACCOUNT WAS FURNISHED NOR THE DATES OF THE CREDIT ENTRIES WERE CLEARLY SPECIFIED. WITHOUT THESE DETAILS THE AO COULD NOT ASCERTAIN WHETHER THESE CREDITS ARE THROUGH BANK OR THROUGH CASH. NO CASHFLOW STATEMENT WAS FURNISHED BY THE ASSESSEE, THE AO BELIEVED THE CREDITS WERE NOT ROUTED THROUGH THE BANK ACCOUNT AND THEREFORE THE GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTHINESS OF THE ASSESSEE WERE NOT PROVED BEYOND RE ASONABLE DOUBT. THE AO THEREFORE TREATED THE 5 ITA NO.402/CTK/2015 ASSESSMENT YEAR : 2007 - 08 SAME AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT. THOUGH DURING SCRUTINY PROCEEDINGS THE ASSESSEE COULD NOT COME OUT WITH ANY GENT REASONS FOR INTRODUCTI ON OF RS.8,00,000/ - TO THE CAPITAL ACCOUNT, IN THE GROUNDS OF APPEAL THE APPELLANT SUBMITTED THAT THE AMOUNT WAS THROUGH CHEQUE TRANSACTION; THE BANK ACCOUNT OF SUCH A BACK PERIOD WAS NOT AVAILABLE WITH THE ASSESSEE AND THE BANK DECLINED TO GIVE STATEMENT FOR THE SAID PERIOD. RS.8,00,000/ - ARE RECEIVED AS GIFTS FROM THE RELATIVES OF THE ASSESSEE NAMELY SMT. PUSPA KARMAKAR AMOUNTING TO RS.4,00,000/ - AND SRI DINABANDHU KARMAKAR AMOUNTING TO RS.4,00,000/ - . THE APPELLANT HAD STATED THE DATES OF EXTENDING THE GI FTS IN CHEQUE, CHEQUE NOS. AND THE NAMES OF THE BANKS FROM WHICH SUCH CHEQUES WERE ISSUED. DURING APPEAL HEARING THE APPELLANT CORROBORATED HIS STATEMENT AS ABOVE THROUGH XEROX COPY OF AFFIDAVIT FROM THE ABOVE TWO PERSONS. HOWEVER THE APPELLANT FAILED TO PRODUCE THE BANK ACCOUNT COPIES OF THE TWO PERSONS EXTENDING THE GIFTS AND THE BANK ACCOUNT COPY OF THE APPELLANT FOR THE RELEVANT FINANCIAL YEAR. THEREFORE THE EVIDENCE AS ABOVE WAS NOT TREATED AS COMPLETE BY ME AND WAS NOT FORWARDED TO THE AO FOR FURTHER VERIFICATION. UNDER THE CIRCUMSTANCES, I CON FIRM THE ACTION OF THE AO AND SUSTAIN THE ADDITION. 13. I AM FULLY SATISFIED AND IN AGREEMENT WITH THE ORDER OF THE LD CIT( A) QUOTED ABOVE AND DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF LD CIT(A). HENCE, I CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THE G ROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE. 14. IN THE RESULT, THE APPEAL F ILED BY TH E ASSESSEE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 11 /04 /2017. . SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 11 /04 /2017 B.K.PARIDA, SPS 6 ITA NO.402/CTK/2015 ASSESSMENT YEAR : 2007 - 08 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SIDHARTH SHANKAR PRAMALIK, C/O. KALINGA JEWELLERY, DOLMUNDAI, BUXIBAZAR, CUTTACK - 01 2. THE RESPONDENT: ITO, WARD 2(3), CUTTACK 3. THE CIT(A) CUTTACK 4. PR.CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//